Cannabis Businesses Confront E-Commerce Challenges

Most new businesses recognize that e-commerce has to play some type of role in their operation, and it’s often a critical one. Smartphones and computers are ever-present in everyday modern life. As of 2013, worldwide business-to-business e-commerce sales topped $1.2 trillion, and an estimated 40 percent of internet users purchase products via the web. These figures are expected to grow exponentially in the coming years, and many industries have downsized their brick-and-mortar operations in favor of e-commerce platforms (think Macy’s, Sears and Kmart). People want to click and buy.

Cannabis e-commerce, meanwhile, has yet to really take off here in the U.S., and for good reason. It’s true that e-commerce can help to optimize a buying experience by clearly putting the price, product, features and purchase in front of consumers so decisions can be fast and easy. However, the product sold by marijuana dispensaries – and the federal law surrounding that product – makes e-commerce a difficult if not impossible prospect, at least for the moment. This is true not just for companies selling the drug itself, but related items, such as pipes, storage containers, bongs, vaporizers and other supplies.

These legal items can often be found on Amazon and other big e-commerce platforms. Other items may include irrigation controls, piping and lights, fertilizers, hydroponics, harvesting and farming equipment and oil extraction supplies. Pretty much everything except the seeds or the plants themselves can be sold online. However, with the exemption of hemp products, marijuana and derivatives of marijuana are not able to be sold online without restriction. It’s important for recreational marijuana retailers to consult with skilled marijuana lawyers before taking their business to the web, to make sure their practices are above-board and in compliance with the law.

Although some industry insiders will tell you there are discreet ways to purchase marijuana and related products online, our L.A. marijuana lawyers want to make it clear that you could risk penalty and prosecution if it’s not done right and without consultation from an attorney.

First one must consider that states have designed a number of regulations to control the seed-to-sale process, which focuses mostly on the actual stores and dispensaries, but very little if anything about e-commerce.

But perhaps the bigger issue is the fact that e-commerce, by its very nature, invites customers to do business across borders. Selling and possessing marijuana is illegal under federal law under the Controlled Substances Act. The federal government’s “Cole Memo” set a precedent for the federal government to back off marijuana businesses that abide state laws that make cannabis legal. However, if an e-commerce operation does business across state lines, that’s inviting difficulties not just with tariffs and taxes, but with federal law.

It should also be noted that the U.S. Postal Service is prohibited from shipping controlled substances, and UPS, Parcel Post and FedEx all block shipping on the same grounds. On top of that, people can’t use their credit cards or debit cards to purchase marijuana online because nearly all banks and credit card companies don’t want to risk breaking federal banking and drug laws, even to do business with marijuana sellers who are state-licensed. That’s why so many marijuana businesses deal solely in cash – which doesn’t work for e-commerce.

Some sellers and business-to-business suppliers are trying to reach out through other channels, such as social media. Others do so through e-mail blasts and weekly newsletters.

It’s best for companies to consult with an experienced marijuana lawyer to determine how best to proceed.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 714-937-2050.